Demystifying digital transformation

Alexandra Brodie: Welcome to our special edition podcast exploring the impact of digitalisation on companies today and going forwards. I am Alex Brodie and I am the co-chair of the firm's global tech team and delighted to be joined today by Lindsay Herbert author of the best selling book Digital Transformation.

Lindsay Herbert: Thanks so much Alex, really happy to be here and very happy to be sharing the lessons that I gathered over the three very long years of writing the book Digital Transformation and lessons I continue to apply in my day job at IBM where I am an inventor and an innovation leader. So yeah definitely something that can be talked about for the duration of a podcast and possibly a whole lot longer.

Alexandra: I guess one of the first questions many people will be asking is "I hear the word digitalisation it gets used an awful lot but really what does it mean?".

Lindsay: I think digitalisation, digital transformation a lot of these digitally type words unfortunately have fallen into the dangerous territory of business jargon. You get people nodding furiously at a meeting but really having no idea what anyone else is thinking and it is probably not the thing they have in their head and its really just their own agenda they start to push.

If I were to break it down I would say first and foremost that digitalisation or digital transformation, whatever you want to call it, really in its purest sense just means to be more adaptive to change. The digital part comes in because you are going to be adaptive to change by leveraging new technologies and you are going to leverage new ways of working that have been popularised during the innovation age. But it is nothing fundamentally different than just delivering what your business has always done but in a modern context. What makes it challenging I think is the fact that change happens a lot faster now as a result of the pace of technological advancement and the society change we experience, as well as the political change which we all experience. So that is making it more difficult and it is accelerating it and that is where the imperative comes in to use technology and to use those new ways of working because that is the only way to be adaptive.

Alexandra: To embrace what is actually happening in front of you?

Lindsay: Exactly, and to understand what is happening in front of you as well. To make good use of data, to make good use of feedback from your client groups and your customer groups you really cannot do that at scale without leveraging technology now. The problem is that people, when they talk about digitalisation or digital transformation, they get so focused on the technology. The technology will change next year or in the next five years depending on what the idea is and the attitude and the culture within the organisation being able to investigate that technology, use it when it is relevant and then abandon it and adopt something new when it is time to. What you are trying to do is not be a business that uses technology you are trying to be a business that delivers its core mission. That is what you are really trying to do.

Alexandra: So it is sticking to what you know is good about your business but using new tools to drive that change?

Lindsay: Absolutely. There is the old cliché when you go to a hardware store you are not buying a hammer and a nail you are buying the ability to put beautiful art in your home. The reason you want beautiful art in your home is because it is going to make you feel more successful about your life and it is going to add to your personal well-being. Keeping that idea, regardless of if you are a hardware store or a FTSE 500 company you have to understand that what you are ultimately trying to do is going to have an impact on people and not to get blind-sided by the tools that you are going to use to create that impact.

Alexandra: So it is not trying to turn yourself into Google it is trying to turn yourself into the best hardware store going.

Lindsay: Exactly right.

Alexandra: In that instance what do you think a company who is not Google who is the best hardware store going has got to do at board level to start driving change, or should you be buying in a group of high innovative 20 somethings with fresh ideas. How do you actually get change into your business?

Lindsay: So I think one of the biggest problems that any company faces is they become very isolated within themselves. Once you become successful and large as a company it is very easy to be entirely focused on your own internal processes. Your own internal structures. What that means is you start to lose important connections with what is going on in the market place, your customer base, your competitors, what is happening out there in the world of technology.

So my biggest piece of advice whether it is C suite or if it is at the coal face is to find ways to be inspired to get better access to things that are happening outside that company. It could be that it is as case of going and attending some conferences outside your sector or having a placement in another company for a period of time or using your ability as a C suite level person to connect with other people outside your sector to find out what it is that they are doing. You might serve them in very different ways but finding ways to break yourself out of that bubble and come up with some inspirational thinking, that is really the first step.

The 20 something year olds, they are very useful for coming in and injecting new ways of working and injecting new ways of accomplishing a goal but the job of the C suite does not change.

It is still to set the direction of the company but if you are the captain of a ship, you figure out where you are going by looking out and looking at the stars, you do not go under the decks of the ship. There's nowhere to go and take your weather readings from below deck but that is what so many companies do when they get into trouble, they start to close themselves off even more. They get lots of business analysts and they gather lots of requirements and before you know it, you have a requirements document that is 200 pages long but it has been informed solely by people in the company already who are also all totally tunnel visioned and cannot see beyond the edge of their own desks. That is the biggest most important thing and it is actually the first step in my book, I call it Bridge and it is bridging the gaps that have formed between the company and the outside world and then the gaps that form internally as well between those different departments.

Alexandra: So it is challenging yourself to reach out to people with a different experience?

Lindsay: Absolutely and connect to the audience you are trying to serve as well because it is easy to think that you are having a positive effect on your audience, your customer base because you are doing what you have always done and the numbers keep coming back looking OK. But what you might be missing out on are fundamental needs that you are not fulfilling that you would only find out about if you really truly engaged with the people that your company is meant to serve. You cannot do that by just looking at the numbers, you have to actually go out and get in there and talk to people and it might be hard depending on the organisation you are in. You might have to do it creatively, heavily regulated sectors for example like farming and finance, they have to come up with creative ways to gain that insight directly from those customers from their customer base but they are doing it. There are some great examples but they have realised that you cannot just look at the spreadsheet, you have to look at that person at the other end of the service.

Alexandra: I think we were also discussing at a different time about companies that had a great digital strategy but had not understood their customer base. We were discussing Blockbuster in that capacity.

Lindsay: My favourite example of failed digital transformation is Blockbuster, they had an amazing digital strategy and an amazing social media strategy.

It is the perfect example of the C suite not charting the waters from above the deck of the ship. They looked down under the decks and they decided how to optimise what they were already doing and they were using digital to optimise the process of having to go to a video store and pick up a DVD and then have to go back two days later to return said DVD. They were optimising that instead of optimising the human need element that they fulfilled as a business, which was we all want to be entertained and we want escapism.

Just before Blockbuster went bust, before the news really hit the mainstream, they were being praised left and right in the industry for their forward thinking use of technology but because the people who should have been steering the ship were not actually paying attention to anything beyond the bow of that own ship, they ended up basically just slowly sinking so digital strategy is only as useful as the overarching strategy. The people who are setting the course of travel absolutely need to understand the reason that their business was founded, if that is still applicable in today's modern context and if so, how is it meant to be delivered today.

Alexandra: So the first step that you are advocating for businesses to adopt when looking at digital transformation is to bridge the gap and think about purpose, how am I going to drive my business forward and could digital help me. It probably could and it probably should but how will it help me deliver my goal, not how will I become digital.

Lindsay: Absolutely and I think the other thing that is worth defining too is what does digital actually mean because there is not any context. Digital is not helpful in some respects because really at its core digital just means the ability to facilitate transactions and so the transaction could be transacting communications or it could just be email and how does email help my business on a really basic level.

Alexandra: Does it?

Lindsay: Yes and there are so many businesses that are using communication channels and having increased their communication channels at the detriment to the productivity of the people delivering the core mission of the business because people are spending more time answering messages, answering things on Slack or Skype or whatever channel has been adopted by that company, let alone how inefficient meetings tend to be run. At a really fundamental level, sometimes digitalisation can just be about are we using communication channels and digital channels in a way that are actually enabling people to do what they are meant to be doing? Everyone knows at least a couple of colleagues who feel like their job is just to answer email but no-one's job is to answer email. Your job is to do a useful thing.

Alexandra: Which is communicated via email?

Lindsay: Exactly.

Alexandra: OK so if you are at this business and you have managed to lift your head up and you are looking at the stars and you have worked out what you are actually doing and where you are going and you think this is it. How would you, because you have led transformation in businesses, how do you recommend that people start because I think some people do have those far reaching thoughts but then get confronted with the world of tech and it is all too big and too confusing there are too many options. How does that C suite person go OK great I have got a plan but how do I drive this through my business?

Lindsay: So if I am speaking about the stages in the book, and these are informed by a broad number of different examples and they are not prescriptive, it is more about understanding the logical stages that one should go through so you have got that big shiny vision. The next thing you need to do is understand what are the barriers that are already in place that explain why you did not do this organically? There will be policies that are so counter-intuitive that are stopping people from doing common sense things.

I gave a good example in the book at Harvard, the chief digital officer wanted to be the first higher ed. institution to launch an iPhone app. This was when the iPhone first hit the market and the chief digital officer tried to hire a permanent role, someone who was going to be an app developer and no-one was applying.

She went and spoke to the head of HR and they said yes we just have not had any applicants through. The CDO looks at the job ads and goes you have asked for five years' experience for a device that has just been invented. The HR director said we are not foolish, we understand that it a brand new device but for the salary you want to pay, for the seniority you want to give this role, we are forced by a policy to require five years' minimum experience.

The CDO at that point, faced a decision of getting around this barrier by getting a contractor. Instead, she realised that if I do not address this right now, this is going to hold me back at every single turn right. This isn't a one off and so she did the hard work of working with the senior executive of the university to change the HR policy because HR couldn't do it. It had to be something that was done at C suite level.

Alexendra: When you're looking at these barriers you don't necessarily want the chief digital officer doing this. You want the head of HR and you want the head of risk.

Lindsay: Everyone. You've got your stage one so you're inspired and you have an idea of one or two things you might want to try tackling. Look at the barriers that stood in the way historically of tackling those areas and then once you've got those different stakeholders keep them engaged because then you can move on to stage three. Stage three is a solution so sometimes you hear people talk about agile as a project, project methodology or you hear people reference the scientific method and you form a hypothesis and then you do a small experiment like a proof of concept and you measure the results.

There are lots of different ways of describing what is effectively an iterative approach and the core fundamental thing that's important in this iterative approach is exactly what you've already said, it's having the right people involved because where companies make huge mistakes is they think get a team of 20 year olds, let's put them on bean bags out in Shoreditch with coffee and pizza. They're going to make a bunch of prototypes and they're going to test them with real customers and then once their prototypes have been proven we'll pick which ones we want to skill and then we'll just press the magic skill button and boom they will be enterprise ready and better to cross our business and, of course, that never ever happens and never works. Instead, you get these really well-meaning people in Shoreditch doing these prototypes, making these things and then when it comes time to take them beyond prototype level they have got no buy in from the parts of the business that would effectively need to do really hard work to make that prototype into something that could integrate with the legacy system and pass all of the different legal and compliance restrictions that are imposed upon normal enterprise level operations. If those stakeholders had been involved from the beginning and people had been collaborating from the beginning they could have spotted those problems. They could have worked around them or pivoted the solution in a different direction to something that would work and would be scalable. The other thing is those people from the traditional parts of the business would be far more willing to give up some of their budget to get through those barriers as opposed to giving it to the kids out of Shoreditch.

Alexendra: And it's the collaborating parts as well as minds with you.

Lindsay: Absolutely.

Alexendra: People have to feel engaged in the solution and want it to work because they've invested in it. It's their baby too.

Lindsay: Absolutely and they want to learn how it works too because sometimes the biggest most daunting thing about any kind of digital project is people thinking they're not qualified because they have never built a website before or used AI. The level of engagement that's needed from stakeholders on any kind of technology project, even an AI or blockchain project, is that understanding of what the business service is and what the end result needs to be and working with the people who are the tech specialists to shape the technology to meet that need. If those people aren't involved, you're going to end up with a piece of technology that's been designed and orchestrated entirely by those tech people who are completely disconnected from the business and the end user. It's not going to be right and then those people from the business miss out on learning how those technologies work and demystifying it and making it feel more accessible so that the next time they could do more than just voice some opinions and actually have a much better understanding.

Alexendra: Yes and it's that thing as well isn't it if you're a company just passing that budget over to an external agency without properly integrating the external agency into the your business, you're losing a great percentage of the value that you're trying to buy.

Lindsay: Absolutely. I also think that if you trust a group of people who have no deep experience of the business itself then they miss out on a learning opportunity. There's nothing more frustrating, I've been that kid in Shoreditch before trying to do the prototype and thinking why isn't this scaling, you miss out on so many deep learnings as the person who's the tech expert because it's useful to know why something won't work with the legacy system or why something won't work because it breaks compliance rules because then you get a chance as a group to innovate around that barrier as opposed to just thinking okay I guess my idea wasn't very good because it never went anywhere.

Alexandra: Yes and if only I'd pivoted this tiny bit of it yes.

Lindsay: Exactly. Yes.

Alexandra: If we've got the tech specialist advisory group in place and they're now threaded through our business and we're talking to everybody and we've come up with this proof of concept, where next do we go with our digital transformation journey because I think we're on step three at the moment.

Lindsay: Yes exactly. Step four I call leverage and really what you're doing is you're taking those early results and showing them to the people who are the actual decision-makers to say does this meet that strategic direction that you were originally setting? Is this showing signs of promise in the right ways? You may need to say you need more budget, people or scale.

If you're coming to them with results it's so much easier to be able to link that back to the original strategy. Even if you have 50 teams with 50 different sets of results you will be able to prioritise which of the ones that are actually the most important for the business and who gets budget.

Alexandra: Yes of course.

Lindsay: Right. Because sometimes people just end up drowning in proofs of concept and pilots and you know they are so many cool little innovative things happening all around the company and then they get the sort of indecision paralysis because they don't want to play favourites. It shouldn't be coming down to favourites, it should be coming down to what is the core mission. How are we trying to achieve that core mission in the next five years and which of these early results are most showing movement in the right direction.

Quickly enough there'll be results that are very positive and you'll be able to get a sense as well from that stage of how much more budget and time they will need. Because the other thing that people often make a mistake on is they think once they've got that prototype and everything is working correctly then the path to scaling it to an enterprise level will be nice and easy. No. It's like the difference between building a dollhouse and building a building that people are actually going to live in.

It's going to be ten times a hundred times more expensive and more time-consuming and there will be lots of dragons under the bridge as you go but if those results look like the kinds of results that you need at scale then you would be crazy not to invest that right.

Alexandra: Yes absolutely and so is step five doing it?

Lindsay: Step five is starting to disseminate. I call it disseminate because where you normally see digital transformation take place in an organisation is in the more customer facing bits first and so there's more imperative and it's also easier to get the results that prove that transformation is needed in the bits that touch the end customer right.

What that means is you still have HR, finance and all the other parts of the business and thinking about how they get that dose of digital transformation because they've been collaborating and working on different projects. The end result has been for a customer purpose so disseminate is about not just having the customer facing parts of the business being collaborative and leveraging new technologies and doing all these great new ways of working.

We want that to be the new culture for the whole company and we want everyone to feel like they can work in these ways and take advantage of data, all the different things that are available to them and so disseminate is about getting the people who have already had a decent dose of working in these new ways and starting to put them in different areas.

Alexandra: Obviously this is about applying additional transformation to achieve corporate goals. Which sector if you had to pick one at the moment would you say was right for the next wave of digital transformation but isn't necessarily embracing digital in a way that's entirely beneficial for its sector goals. I was looking at this and thinking the life sciences sector seems to be running towards digitalisation at the moment but what's your view?

Lindsay: I wouldn't actually pick a specific sector instead I would pick parts within companies and HR transformation is something that companies are now recognising the real value of. IT and procurement transformation as well. I think that's actually going to be the next wave when we talk about big changes instead of digitise your business it's going to be digitise your back office and that's what I think is going to have the most potential ground to gain in terms of a company's competitive edge.

If you think about it, finance, HR, the legal parts of a business, all those things enable the business to do what it does. If they're not empowered then that is going to hold back any other opportunities there are to do any further innovation so it has to be the next area. I think it's just going to take some people who are leading, the ones who have already done digitisation across the customer facing parts to start sharing some of the real value they've had out of digitising and transforming the back office functions. Sharing those will help inspire the ones that are the most reluctant.

Alexandra: If you could give a project to most businesses right now, look at your HR people?

Lindsay: Well unless they are still not doing it for the customer because the customer is the most important. Yes. Nobody exists just to have an HR department. Let's hope not.

Alexandra: Lindsay that was absolutely great and I think those five topics and a lot of the points you brought forward are spot on and they're all covered in greater depth with the report that we've recently launched called Tides of Disruption - How to Navigate Business Transformation where we drew on the expertise of Dr Carsten Sørensen at the London School of Economics. It's been great talking to you about this and thank you very much and we'll see you all next time.